Hewlett-Packard Shuffles Board, Adds Whitman

Hewlett-Packard Co., the largest
maker of computers, announced a board shake-up in the wake of
criticism over the way it handled the departure of Chief
Executive Officer Mark Hurd.

Departing board members are Robert Ryan, John Joyce, Joel Hyatt and Lucille Salhany, Palo Alto, California-based HP said
in a statement today. Directors joining the board are Shumeet
Banerji, CEO of Booz & Co.; Patricia Russo, former CEO of
Alcatel-Lucent SA; Dominique Senequier, CEO of AXA Private
Equity; Meg Whitman, former CEO of EBay Inc.; and Gary Reiner,
former chief information officer of General Electric Co.

The board had been faulted over Hurd’s exit, including
from shareholders who filed lawsuits. It’s unusual for companies
to revamp the board and management as completely as HP has done
since naming Leo Apotheker and Ray Lane as CEO and chairman
respectively last September, said Dennis Carey, vice chairman
at executive recruiter Korn/Ferry International.

“It’s extremely rare for a company to almost
simultaneously install both an outside CEO and an outside
nonexecutive chairman and also so dramatically overhaul its
board, as HP has done,” said Carey.

“This happened at Tyco International, which had to do a
complete makeover when it was recovering from the scandals that
occurred under former CEO Dennis Kozlowski, but it’s highly
unusual,” he said.

Support for Apotheker

The new appointees are more likely to support the agenda of
Apotheker and Lane, and help HP put last year’s departure of
Hurd behind it, analysts said.

“As an investor, you need to look at HP’s stock with fresh
eyes,” said Jayson Noland, an analyst at Robert W. Baird & Co.
in San Francisco. Investors have seen HP’s board as “immature,”
said Noland, who has an “outperform” rating on HP shares.

“This will help put to rest some of the events of 2010,”
he said. “Maybe this changes the situation and gets everyone
moving in the same direction.”

HP is planning an independent probe into the circumstances
of Hurd’s departure, which was announced in August, according to
court documents. New appointments may be more inclined to back
goals outlined by Apotheker, said Douglas Ireland, an analyst at
JMP Securities LLC.

“If there were people on the board who differed with his
new strategic outlook, his focus on software, for example, maybe
it makes sense to have board members who are more aligned with
that vision,” said Ireland, who’s based in San Francisco.

Less Scrutiny

Apotheker and Lane said in an interview that the new board
appointments would be accompanied by tighter controls on how
directors interact with the press, following months of leaks.

“It was a feeding frenzy,” said Lane. “That is just not
the way it is going to work anymore. The board needs to operate
in privacy.”

Apotheker said Banerji, for example, who has also worked as
an academic at the University of Chicago’s business school,
would bring a fresh outlook to the board.

“We felt we needed someone that would bring a longer-term
perspective,” said Apotheker. “This is a great opportunity for
us to diversify our skills.”

Hurd resigned as chairman and CEO after an internal
investigation found he violated business conduct standards in
trying to conceal a personal relationship with a contractor.
Shareholder lawsuits allege that HP directors wasted company
money by awarding Hurd as much as $53 million in severance and
other benefits.

Hurd’s Directors

HP rose 46 cents to $46.78 at 4 p.m. on the New York Stock
Exchange, reversing an earlier decline, amid news of the planned
changes.

Directors who joined the board after Hurd became CEO in
2005 include Ryan and Joyce, who became directors in 2007.

The departing directors left of their own volition, said
Lane.

“These are the board members that graciously said they
would step down make room for new blood,” he said.

HP is the fourth corporate board of which Pat Russo is now
a member. She also is a director of Pittsburgh, Pennsylvania-
based aluminum maker Alcoa Inc., Whitehouse Station, New Jersey-
based pharmaceutical company Merck and Co., and Detroit-based
General Motors Co., where she was named lead director in March.

She was one of six new directors named to GM’s board after
the company emerged from bankruptcy in 2009. Russo stepped down
as CEO of Alcatel-Lucent in 2008 after two years of losses that
stemmed from the merger of the two telecom hardware companies.

Whitman and Reiner

Meg Whitman, former CEO of EBay, joins HP’s board following
her unsuccessful campaign for California governor last year.

Gary Reiner, another new HP director, is now a special
adviser at Greenwich, Connecticut-based investment firm General
Atlantic LLC.

Dominique Senequier runs AXA Private Equity, the investment
buyout arm of French insurer AXA Group, with close to $30
billion in assets.

HP’s new board of 13 directors will include three women, a
higher number than most corporate boardrooms. Less than 20
percent of Fortune 500 companies have three or more women
serving together as directors, according to a 2009 survey by
Catalyst, the New York-based research organization. Two of the
13 directors at International Business Machines Corp. are
female; Oracle Corp. also has two women among its 13 directors.